Common Stock:

The Company is authorized to issue 60,000,000 shares of Common Stock with a par value of $0.0001 per share. Holders of the Company's Common Stock are entitled to one vote for each share. As of December 31, 2019, the Company had 22,862,835 issued and outstanding Common Stock shares.

Initial Public Offering:

On December 18, 2018, the Company consummated its initial public offering ("IPO") of 7,000,000 units ("Public Units"). The Public Units sold in the IPO were sold at an offering price of $10.00 per Public Unit, generating total gross proceeds of $70,000,000. The Public Units each consists of one share of Common Stock and one warrant to purchase one-half of a share of Common Stock ("Public Warrant"), with every two Public Warrants entitling the holder to purchase one share of Common Stock for $11.50 per full share.

Following the Recapitalization Transaction, the Company retained the $60.1 million balance held in a trust account, after redemptions of IPO shares held by certain shareholders.

Simultaneous with the consummation of the IPO, the Company consummated the private placement of an aggregate of 2,900,000 warrants ("Private Placement Warrants").

Issuance of Share Capital:

During 2018 BiomX Ltd issued an aggregate amount of 3,028,990 Preferred A Shares (pre-merger) for a total consideration of $13,000 thousand, in connection with various share purchase agreement with investors.

In November 2018, the Company entered into a share purchase agreement (the "November 2018 SPA") with new and existing investors (the "November 2018 Investors"). In accordance with the November 2018 SPA, the Company issued to the November 2018 Investors a total of 5,478,985 Preferred B Shares at $0.0001 nominal value (the "Preferred B Shares") for total consideration of $31,955 thousand as follows:

Share Exchange:

As detailed in Note 1, as part of the Recapitalization Transaction on October 28, 2019, the Company issued 15,069,058 Common Shares in exchange for approximately 65% of the issued and outstanding ordinary shares and all the preferred shares of BiomX Israel. The number of shares prior to the Recapitalization Transaction have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.

In addition, the Company also agreed to issue the following number of additional shares of Common Stock, in the aggregate, to shareholders on a pro rata basis, subject to the Company's achievement of the conditions specified below following the recapitalization transaction (all with respect to the Company's common shares traded on the NYSE):

Preferred Stock:

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of December 31, 2019, no preferred stock has been issued.

Equity Incentive Plan:

In 2015, the board of directors of BiomX Israel approved a plan (original option plan) for the allocation of options to employees, service providers, and officers (the "2015 Plan"). The options represented a right to purchase 1 Ordinary Share of the BiomX Israel in consideration of the payment of an exercise price. Also, the options were granted in accordance with the "capital gains route" under section 102 and section 3(i) of the Israeli Income Tax Ordinance and section 409A of the Israeli Internal Revenue Code.

The original option plan was adjusted in 2019 following the Recapitalization Transaction on October 28, 2019. Following the Recapitalization Transaction, each outstanding option entitles its holder to purchase 1 Common Stock share of the Company. As a result, the number of options and exercise price per share were adjusted in a technical manner such that there was no change in the fair value of the awards under the adjusted option plan. The number of outstanding options and exercise prices in this Note have been restated to reflect the adjusted option plan.

As of December 31, 2019, there are no shares remaining for issuance under the original option plan.

The Company adopted a new incentive plan in 2019 (the "2019 Plan") to grant 1,000 options, exercisable to Common Stock, par value $0.0001 per share. As of December 31, 2019, no options were granted under the 2019 plan.

The aggregate number of shares of Common Stock that may be delivered pursuant to the 2019 Plan will automatically increase on January 1 of each year, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to four percent (4%) of the total number of Common Stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board of Directors may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of Common Stock than provided herein.

Stock Options:

All options granted during 2018 and 2019 were made under the 2015 Plan.

During 2018, the Board approved the grant of 785,775 non-tradable options without consideration to 27 employees and 199,481 non-tradable options without consideration to 2 consultants.

During 2018, 30,938 options were exercised to purchase ordinary shares at an exercise price of $0.001 per share.

During 2019, the Board approved the grant of 704,669 options without consideration to 22 employees and 79,630 options without consideration to 2 consultants. 527,716 of the options granted are to the executive officers of the Company.

During 2019, 74,581 options were exercised to purchase ordinary shares at an exercise price of $1.34 per share.

Certain senior employees are entitled to full acceleration of their unvested options upon the occurrence of cumulative two certain events.

The fair value of each option was estimated as of the date of grant or reporting period using the Black-Scholes option-pricing model.

The fair value of options was estimated at the date of grant using the following assumptions:

The cost of the benefit embodied in the options granted in 2019 and 2018 based on their fair value as at the grant date, is estimated to be $1,406 thousand and $1,451 thousand, respectively. These amounts will be recognized in statements of comprehensive loss over the vesting period.

The Company recognized share-based compensation expenses in connection with options granted to executive officers of the Company in the amount of $732 thousand and $405 thousand for the years ended December 31, 2019 and 2018, respectively.

The total unrecognized compensation expense was $2,308 thousand and $3,026 thousand as of December 31, 2019 and 2018, respectively. These expenses will be recognized over a period of approximately 4 years.

Warrants:

As of December 31, 2019, and 2018, the Company had the following outstanding warrants to purchase Common Stock as follows:

236,552 warrants were fully vested and exercisable on the date of their issuance. The remainder of the warrants will vest and become exercisable subject to achievement of certain milestones specified in the agreement as follows:

The Company may redeem the Public Warrants:

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a "cashless basis," as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.